When selling a dental practice, it’s easy to fall into the trap of overestimating its “potential.” Many sellers believe that the untapped possibilities of growth—more patients, expanded services, or better dental practice marketing—should factor into the sale price. However, buyers are purchasing a business based on its current performance, not what it could be. Here’s why potential can’t be sold and why dental practices must be valued on proven performance.
The concept of selling potential assumes that a buyer will be willing to pay a premium for what could happen in the future. However, buyers are generally risk-averse and interested in the track record of the practice as it stands today. They want to invest in a practice that is already generating consistent revenue, has an established patient base, and operates efficiently.
The potential is speculative, and buyers are aware that there is no guarantee of future growth, no matter how promising the possibilities may seem.
This is why a dental practice valuation focuses on historical performance rather than future possibilities.
Most buyers will need dental practice financing to purchase a dental practice, and lenders are cautious. Banks and financial institutions will assess a practice’s performance based on its historical financials, not on future growth potential. When applying for a loan, a buyer will need to demonstrate that the practice’s current cash flow can support the loan payments.
If the numbers don’t add up on paper based on present operations, banks won’t lend more simply because a practice might grow down the road.
Even if a dental practice is in a prime location or offers room for growth, realizing that potential requires substantial effort, investment, and time. Buyers are aware that expanding services, attracting new patients, or increasing dental practice profitability won’t happen overnight. It involves strategic planning, marketing, staffing, and possibly even renovation or technology upgrades.
The buyer must be willing to put in that work, and for that reason, they won’t pay a premium for the opportunity to exert additional effort. They’ll price the practice based on what’s currently established, not what could be done in the future.
If the practice has unrealized potential, the seller should ask themselves why it hasn’t been tapped into yet. Is it due to the dentist’s reluctance to expand, a competitive market, or perhaps a limited patient base in the area? The reasons behind untapped potential could indicate risks for the buyer, and they may be hesitant to factor that into the purchase price.
Buyers know that potential comes with risks, and they’re likely to discount that value when evaluating the price during the dental practice sales process.
At the end of the day, most buyers are looking for a stable, predictable investment. A dental practice that consistently brings in revenue with a steady flow of patients is far more attractive than one with unproven possibilities.
The value of a dental practice is rooted in what it’s currently achieving—its collections, profitability, and systems in place—not in what it could achieve under ideal circumstances.
While you can’t directly sell potential, you can take steps to realize some of that potential before listing the practice for sale. This can make the practice more attractive and improve its value. Consider implementing the following strategies:
By realizing some of the practice’s potential, you can create a track record of improved performance that buyers will pay for.
Selling a dental practice is about demonstrating consistent, proven results, not speculative growth. While potential is enticing, it’s not something you can count on when determining the sale price. Instead, focus on showcasing the strength of the practice as it stands today. If there is potential for growth, consider tapping into it before selling to increase value—but remember, buyers are paying for what exists, not for what might be.
In a dental practice transition, realistic expectations on both sides ensure a smooth sale and a fair price. A well-established, thriving practice will always hold more value than one filled with unrealized possibilities.
James Ackerman
ADS Midwest
Endorsed by the Illinois State Dental Society
ph: 314-449-4517
Fax: 314-666-8609
